Retiring soon after 21 years. Wonder if anyone has rolled over their TSP accounts after leaving the military? Any helpful tips out there?

you dont have to and can leave it there. you CANNOT beat the fees inside the TSP on the outside market.

Agree with the above poster. If I am you I put as much as I can into it before retiring, then move all funds within your TSP to one of the "year funds" (based on when you will retire for good), and then just leave it there. The expense ratio on that sucker is awesome and no other company can match it. You can go to the FINRA website to compare different funds and to see how much you will pay in fees over time. It adds up quick! Talking thousands of dollars. Also if you plan to go DA Civilian you can continue to contribute and the govt. will even match contributions up to 5% I think. I Wish they did that on they did that for us military types.

While fees are important and yes TSP fees are low, are you more worried about fees or performance? Any fund choices you have within the TSP are index funds, or if a target (or year) fund a mixture of index funds. This means you take on all the risk of the market with no active management. A solid money manager generally takes on 60-65% of market risks with better performance in the long term. Just remember you get what you pay for. If you don't pay much you don't get much. Do you think someone from TSP is going to call your family and help them access your money if something where to happen to you?

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A solid money manager generally takes on 60-65% of market risks with better performance in the long term.

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By your definition of what constitutes a "solid money manager" there are few of them. Less than one in ten can beat the S&P 500 in annualized returns for a ten year period (even excluding management fees). All the risks of the market are often far less than all the risks of an actively managed investment funds. I have been very happy with a couple of actively managed funds that I've owned for a about five years but it's not easy to find funds open to new investors that consistently beat the market year in and year out. While searching for a solid fund manager there are a lot worse places to have your money than in a broad market index.

Regarding fees and money managers vs just using index funds: http://www.npr.org/2013/06/05/188306471/resisting-the-temptation-to-win-when-investing

Also, do y'all do the targeted retire date with your accounts? I'm trying to get mine set up now and was just curious.

[This message has been edited by bigtruckguy3500 (edited 6/28/2014 3:12p).]

Agree with Ulysses. It's difficult and rare to beat the basic SP500 index.

I transitioned out of TSP to a spectrum of Vanguard funds. Just about the lowest fees out there, well managed, very good customer service. You can find a few Vanguard funds that regularly beat the SP500 over time, but remember the old warning, "past performance is not an indicator of the future."

BigTruck, it's all about how much risk management over time. Those time index / balanced funds make it easy, but just recognize that as you approach retirement your growth in a bull market may seem disappointing. On the other hand, if the market crashes you will be in a much better situation.

You can beat the S&P, but you have to follow a few rules

1) pay close attention to the betas. Don't be tempted to invest in straight 2+
2) Cash matters more than NI at filing time
3) hedge your high performers with some secondary goods (beer, walmart)
4) don't bet naked
5) if you bet, make a collar spread
6) EPS is the trump multiple
7) take dividend stocks, even though it may be leveraged or diluted

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You can beat the S&P, but you have to follow a few rules

1) pay close attention to the betas. Don't be tempted to invest in straight 2+
2) Cash matters more than NI at filing time
3) hedge your high performers with some secondary goods (beer, walmart)
4) don't bet naked
5) if you bet, make a collar spread
6) EPS is the trump multiple
7) take dividend stocks, even though it may be leveraged or diluted

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Can you translate this? Like you are talking to a 3rd grader if possible.

Yeah sorry I was drunk posting that

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1) pay close attention to the betas. Don't be tempted to invest in straight 2+

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A "beta" is an indexed risk profile against the S&P 500. The S&P has a risk of "1". That means that when the S&P goes up 1%, the S&P goes up 1%, and vice versa. Every fund/stock has a beta (derived by running a regression of it's returns vs. the S&P 500). A stock with a beta of 2.0, for example, would be considered twice as risky as the S&P. When the market goes up 1, this stock can be expected to go up 2. When the market goes down 1, this stock can be expected to go down 2. High-beta stocks are usually things like emerging technology, investment banks, etc. Low-beta stocks, like Walmart, don't move as rapidly up or down because they are not as subjected to financial winds. No matter how crappy the economy is, people still shop at Walmart. You can rake money in a bull market with 2.0s and higher, but you should balance your portfolio with some low-beta stocks that can buffer any sharp declines.

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2) Cash matters more than NI at filing time

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Analysts and investors get wrapped around the axles at reporting (10K) time about Net Income. For high performing stocks, Cash Flow from Operations and Cash Available is more often more important, because investors understand that accountants can make Net Income appear or disappear through changing investments, delaying capital expenditures, etc

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3) hedge your high performers with some secondary goods (beer, walmart)

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See #1. When the economy tanks, people still shop at Walmart and buy more beer.

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4) don't bet naked

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This is mostly for gamblers. It is extremely risky to make a 6-month bet on a stock/fund you don't own. If you're wrong, you'll not only lose what you thought you were going to make, you'll also have to buy the asset you wanted to make a profit on in the first place. Avoid naked (I don't have the asset right now) bets

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5) if you bet, make a collar spread

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If you like betting, you can create a "collar" that provides downside insurance if you bet wrong. The initial outlay will lower your returns, but it prevents catastrophic loss.

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6) EPS is the trump multiple

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In the "multiples" on the reports, Earnings Per Share is the one key statistic you should look at if you don't have time to look at anything else. It will tell you how the company is performing at its key job - earning money - per stock outstanding. The higher it is earning per share outstanding the better.

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7) take dividend stocks, even though it may be leveraged or diluted

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Dividends paid out reduce the value of the stock, but they provide cash flow to the shareholder. Many companies that pay regular dividends will actually take on debt (leverage) to meet dividend expectations if their earnings/cash have fallen short. While this also reduces the value of the share, it is still cash in your pocket. Boeing, for example, took on a lot of debt a few years ago to make its quarterly dividend payment. Even though it reduces book value, it provides marekt value because the shareholders know the company is looking out for them.

[This message has been edited by Tango Mike (edited 6/30/2014 2:29p).]

Thanks!

I teach finance at USMA, and one of the electives I teach is basically how to finance a military life and retirement. If anyone has any questions I'll be glad to help or at least do the research

I'm curious to hear the opinion of a military finance professor. Do you plan on rolling over your TSP contributions into a Roth upon retirement from active duty and paying the taxes on the distribution? That would be a significant lump sum tax hit but I'm considering doing that to get all my retirement savings out of tax deferred and into post-tax accounts because I have a strong hunch that tax rates on my cohort will be increasing dramatically during my retirement (to pay for the ballooning debt).

Yes, and the tax reason is an excellent reason why. However, another reason is purchasing power relative to inflation premiums and nominal interest rates. The TSP funds are not benchmarked for real interest rate securities, so over time your returns will actually be less than the inflation premium (assuming continued inflationary trends of the past 5-10 years). There is something called the Fisher Effect, which says that even if your nominal (quoted) interest rate is above inflation, over time if that rate does not rise/fall with inflation your real increase in purchasing power will erode. What does that mean? The low fees are great for building a nest egg. But, upon retirement it is better to pay a brokerage spread (fees) and have inflation managed as part of your plan. Add in the inflation power of the later, possibly-higher taxes, and it's risk you don't have to incur

Tango,
Does the above advice go for the ROTH TSP as well? Also what, in your opinion, is the best COA for investing as a military officer? Max out ROTH TSP (16k) then additional ROTH (5500), then other investments? I just got into the ROTH TSP but I am not maxing it out. In your opinion should this be my primary goal as far as investing for retirement? Thanks.

[This message has been edited by AEK (edited 7/1/2014 9:21a).]

Wow! Been away for a few days and just now checking this. Mom had to have a triple bypass done that was found during prescreen for a knee replacement surgery.

Anyway, thanks for all the great information!

For those looking beyond TSP, but don't want to be hands on, check out Betterment.com. Semi-managed for a very low price. You basically set your risk profile and it creates a portfolio of ETF's as well as periodic rebalancing. Wealthfront is a similar service, and I currently have money in both, but I like Betterment better.

I've dabbled in buying and trading stocks, and in the end it is not worth it to me, even though I usually made money. The distraction and stress just weren't worth it.